The breakeven rate of inflation is the difference in yield between a nominal Treasury note and a Treasury Inflation-Protected Security (TIPS) of the same maturity. It reflects the market&#8217;s expectations for average inflation over the bond&#8217;s term.

Breakeven Inflation Rate

A Treasury Inflation-Protected Security (TIPS) is a U.S. Treasury bond designed to protect investors from inflation. Its principal value adjusts with changes in the Consumer Price Index (CPI), ensuring that both the principal and interest payments rise with inflation.

Treasury Inflation Protected Security

The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for a basket of goods and services. It is a key indicator of inflation and is used to assess changes in the cost of living and economic health.

Consumer Price Index

Quantitative easing (QE) is a monetary policy tool used by central banks to stimulate the economy by purchasing government securities or other financial assets. This increases the money supply, lowers interest rates, and encourages lending and investment during periods of economic stagnation or deflation.

Quantitative easing

The market rate is the prevailing interest rate determined by supply and demand for loans or investments in a free market. Also known as &#8220;the neutral rate.&#8221; It reflects the cost of borrowing or the return on investment that is widely accepted in the marketplace.

Market rate

The interest rate at which depository institutions, like banks and credit unions, lend reserve balances to other institutions overnight. It is set by the Federal Open Market Committee (FOMC) as a key tool of monetary policy to influence economic activity, inflation, and employment. Changes to the federal funds rate impact borrowing costs across the economy,

Federal funds rate

The Keynesian concept that an initial amount of spending leads to a greater overall economic impact as it circulates through the economy. Demand-side spending policies are based upon this fallacious theory.

Multiplier effect

A type of currency (typically paper money) that has value because a government says it does, not backed by a physical commodity like gold or silver.

Fiat currency

A decrease in the general price level of goods and services, often associated with reduced consumer demand and economic slowdown, and invariably caused by a contraction in the (M2) money supply.

Deflation

The total amount of money available in an economy, including cash, checking deposits, and easily convertible near money. Typically, the M2 measure is used/cited.

Money supply

An economic theory advocating for government intervention, especially fiscal policy (like spending), to manage economic cycles and ensure full employment.

Keynesian economic theory

Economic policies, typically involving lowering interest rates or increasing the money supply, used by a government or central bank to encourage economic activity.

Monetary stimulus

An economic system where the government controls and regulates production, distribution, and prices of goods and services

Central planning

The difference between the value of a country&#8217;s exports and imports over a specific period, contributing to the overall trade balance.

Balance of trade

A situation where a country&#8217;s imports exceed its exports, leading to a negative balance of trade.

Trade deficit

A situation where a country&#8217;s exports exceed its imports, resulting in a positive balance of trade.

Trade surplus

A political system in which power is exercised through large organizations (companies, trade unions, etc.) who work in concert with the government; with the goal of influencing the direction of the state, to benefit of corporate interest and at the expense of the will of the people and to the detriment of the common good.

Corporatism

While the U.S. Treasury’s Bureau of Engraving and Printing (BEP) physically prints currency, the term “printing money” figuratively refers to the Federal Reserve’s ability to create and destroy money. The Fed creates money electronically by expanding its balance sheet. To do so, it purchases bonds from member banks through open market operations (FOMC), simultaneously creating a liability in the form of bank reserves and an asset in the form of the purchased bonds. The goals of “printing money” include increasing liquidity (loanable funds), lowering interest rates, boosting the value of risk assets, and devaluing the dollar.

Printing money

The theoretical interest rate at which the economy operates at full employment and stable inflation, without the need for monetary policy intervention.

Natural rate of interest

Keynesian economics refers to the macroeconomic theory and models developed by John Maynard Keynes, emphasizing the importance of aggregate demand (total spending in the economy) in influencing economic output and inflation. According to Keynesian economics:
<ol>
<li>Aggregate demand is volatile and unstable, leading to inefficient macroeconomic outcomes, including recessions and inflation.</li>
<li>Fiscal policy (government spending and taxation) and monetary policy (central bank actions) can help stabilize economic output, inflation, and unemployment over the business cycle.</li>
<li>Government intervention is necessary during recessions and depressions to mitigate economic downturns and promote full employment.</li>
</ol>
Keynes&#8217; theories are largely responsible for western nation&#8217;s rapid increase in deficit spending and current sovereign debt levels.

Keynesian

Industrial or economic output is the productivity of a nation or region as measured by the value of goods and services produced over time.

Output

Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment. When short-term interest rates are at or approaching zero, normal open market operations, which target interest rates, are no longer effective, so instead a central bank can target specified amounts of assets to purchase. Quantitative easing increases the money supply by purchasing assets with newly created bank reserves in order to provide banks with more liquidity.

A central bank&#8217;s zero interest rate policy, where they use monetary policy to lower the cost of funds to effectively zero interest.

ZIRP

The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles are generally measured using the rise and fall in the real gross domestic product (GDP) or the GDP adjusted for inflation.
The business cycle should not be confused with market cycles, which are measured using broad stock market indices. The business cycle is also different from the debt cycle, which refers to the rise and fall in household and government debt

Business cycle

An increase in the general price level of goods and services, as measured by the consumer price index (CPI), usually attributed to an increase in the volume of money and credit.

Inflation

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Real income can also be known as real wages. Real income refers to the wages of an individual or entity after accounting for inflation. Individuals often closely track their nominal vs. real wages to have the best understanding of their purchasing power
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Real wages

An unexpected event that affects the production and cost of a commodity, which in turn swiftly results in a change in the commodity&#8217;s price.

Supply chain disruptions

Defined by a period of rapidly rising input costs, such as raw materials, labor, energy, and transportation expense, requiring companies to raise retail prices sufficiently to maintain profit margins.

Cost-push inflation

Defined by a period when the demand of a good or service exceeds the supply or availability.

Demand-pull inflation

<h1 class="post_title entry-title">The money supply, or money stock, is the entire stock of currency and other liquid instruments circulating in a country’s economy as of a particular time. Often quantified as <a href="https://fred.stlouisfed.org/series/M2SL">M2</a>, the money supply can include cash, coins, and balances held in checking and savings accounts, and other near money substitutes. Economists analyze the money stock as a key variable to understanding the macroeconomy and guiding macroeconomic policy</h1>

Accredited investors have a net worth over $1 million, excluding primary residence, and/or income over $200,000 per individual, $300,000 for couples, in each of the prior two years. Investment advisers and entities, such as LLCs, trusts, and family offices have <a href="https://www.sec.gov/education/capitalraising/building-blocks/accredited-investor">different criteria</a>.

Accredited investor

Includes non-owner-occupied rental property, multi-family, industrial, commercial, and mixed-use investment property.

Investment real estate

Automated Clearing House transfers are electronic, bank-to-bank money transfers processed through the Federal Reserve’s ACH Network. ACH transfers are a fast, efficient, and safe way to move funds to/from individuals and financial entities.

Annual percentage rate, or the yearly rate charged for a loan or earned by an investment.

Asset-based lending refers to loans secured by an asset, such as real estate. Asset-based loans tend to simplify underwriting, as lenders focus more on the underlying asset and less (than traditional bank channels) on credit score and debt-to-income ratios.

Asset-based

The final amount due on a loan that is structured as a series of small monthly payments followed by a single much larger sum at the end of the loan period. Interest-only loans are a form of balloon payment arrangement.

Balloon payment

A short-term loan, typically for one year, meant to provide or extend financing until a more permanent arrangement is made.

Bridge loan

A BPO is an evaluation report prepared by a real estate broker or agent to estimate the value of a property. BPOs are commonly used as an alternative to formal appraisals and are typically ordered by lenders, mortgage companies, banks or other financial institutions.

Broker’s price opinion

Collateralized mortgage obligations are asset-backed securities that use mortgage-backed securities as collateral.

A type of conventional mortgage that aligns with the criteria set by the FHFA. Meeting these established standards makes these loans eligible to be purchased by Fannie Mae and Freddie Mac

Conforming loan

Are loans offered by private lenders, such as Bank of America, Wells Fargo, or Chase, and are not offered or secured by a government entity.

Conventional mortgage

More than one asset or property is used to secure a single loan. Can also occur when a single asset is used to secure more than one loan.

Cross collateralization

A legal arrangement in which a third party temporarily holds money or property until a particular condition has been met, such as the fulfillment of a purchase agreement.

Escrow

Similar to Freddie Mac (FHLMC), Fannie Mae (FNMA) Is a government-sponsored enterprise (GSE) that purchases mortgage loans and/or backs, these loans, and creates liquidity for the mortgage market.

Fannie Mae

The Federal Housing Finance Agency is a government agency charged with overseeing the Federal Home Loan Bank system; a nationwide system of banks, savings associations, credit unions, and insurance companies that make long-term home mortgage loans.

FHFA

A mathematical scoring system created by the Fair Isaac Corporation, and used to predict borrowers’ ability to repay their debts. FICO scores range between 300–850, and scores between 670–739 are considered good. 740–799 is considered very good. And scores ≥800 are considered exceptional. FICO scores are based on five factors; payment history, accounts owed, length of credit history, credit mix, and new credit.
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FICO score

A first trust deed has priority over all other mortgages or trust deeds. This simply means that the first trust deed was recorded before any other liens, encumbrances or trust deeds involving your property.

First trust deed

Similar to Fannie Mae (FNMA), Freddie Mac (FHLMC) Is a government-sponsored enterprise (GSE) that purchases mortgage loans and/or backs, these loans, and creates liquidity for the mortgage market.

Freddie Mac

Combines a virtual and in-person inspection. The appraiser uses photographs or video walk-through to view the property. A local professional is used to gather additional information on the home, such as measurements, details, or specific features.

Hybrid appraisal

A type of investment or asset that isn’t readily convertible to cash and/or the investor generally suffers a loss of principal if forced to sell prior to maturity or redemption.

Illiquid

A mortgage-backed security is a type of asset-backed instrument, secured by a mortgage or pool of mortgages.

Master limited partnerships are publicly traded investment vehicles, taxed as a partnership. MLPs combine the tax benefits of a partnership with the liquidity of publicly traded securities.

A type of loan typically used to purchase various types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments. Loans may be structured in a variety of ways, such as fully amortized, interest-only, or with a balloon payment after a certain period of time.

Mortgage

A collective investment in which money from many investors is pooled and invested in stocks, bonds, short-term money market instruments, and/or other securities under the direction of a fund manager.

Mutual fund

A type of loan that does not meet the guidelines of GSEs, such as Fannie Mae and Freddie Mac and, therefore, cannot be sold to them. Non-conforming loans tend to be offered by private entities lenders.

Non-conforming loan

Unlike traditional judicial foreclosures, non-judicial foreclosures allow a lender/creditor to foreclose on a property without having to go to court to obtain a court order/decree. Hence, they tend to be much simpler, faster, and less costly than judicial foreclosures.

Non-Judicial foreclosure

A formal arrangement by two or more parties to manage and operate a business and share its profits. There are three common types of partnerships; general partnership (GP), limited partnership (LP), and limited liability partnership (LLP).

Partnership

Are funds in a portfolio from many individual investors, aggregated for the purposes of a particular investment. Mutual funds, hedge funds, and UITs are all examples of pooled funds.

Pooled investment

Similar to a mutual fund, REITs pool the capital of numerous investors and invest in various types of real estate (commercial, industrial, residential, healthcare/specialty, mortgage, etc.). REITs tend to be either public/publicly traded or private, meaning they are not listed or sold on a securities exchange and tend to be illiquid.

REIT

The length of time it will take for a loan agreement to be completed.

Term

A written instrument legally conveying property to a third party, often used to secure an obligation such as a mortgage or promissory note.

Trust deed

A unit investment trust is a type of investment that offers a fixed portfolio of securities, typically stocks or bonds, to investors. UITs are typically created for a limited period of time and have a termination date, at which point the portfolio is liquidated.

Form 1098, a mortgage interest statement, is used by taxpayers to report the amount of interest and related expenses paid on a mortgage during the tax year.

1098

A tax document that reports income you receive from sources other than an employer, such as interest, capital gains, and miscellaneous proceeds.

Glossary

Breakeven Inflation Rate

Treasury Inflation Protected Security

Consumer Price Index

Quantitative easing

Market rate

Federal funds rate

Multiplier effect

Fiat currency

Deflation

Money supply

Keynesian economic theory

Monetary stimulus

Central planning

Balance of trade

Trade deficit

Trade surplus

Corporatism

Printing money

Natural rate of interest

Keynesian

Output

Quantitative easing

ZIRP

Business cycle

Inflation

Real wages

Supply chain disruptions

Cost-push inflation

Demand-pull inflation

Money supply

Accredited investor

Investment real estate

ACH

APR

Asset-based

Balloon payment

Bridge loan

Broker’s price opinion

CMO

Conforming loan

Conventional mortgage

Cross collateralization

Escrow

Fannie Mae

FHFA

FICO score

First trust deed

Freddie Mac

Hybrid appraisal

Illiquid

MBS

MLP

Mortgage

Mutual fund

Non-conforming loan

Non-Judicial foreclosure

Partnership

Pooled investment

REIT

SFR

Term

Trust deed

UIT

1098

1099